Has cash really had its day? - Part 1

In the first part of his interview with Marc Terry, Managing Director-International, Cardtronics, Principal in the Technology & IT Services Executive Search Practice at Odgers Berndtson, asks if cash has a future.

A hijacked ATM in his home town stimulated to query the importance of cash and ask what the digital payment revolution means for consumer choice. And who better to ask than the international leader of Cardtronics, the world’s largest ATM operator, operating approximately 230,000 machines across four continents.

Once there were three ATMs in my village in East Hampshire, England. Then, some guys stole a forklift and ripped out one of the ATMs from the local Lloyds branch. This has still not been replaced. Last month, the same thing happened to one of your machines from the Coop.

This leaves us with only one machine at a Sainsbury’s in a rural area where people are still heavily reliant on cash.

To start with, Marc, how expensive is it to replace one of these machines?

Marc Terry (MT): In the UK, Cardtronics runs over one-third of the UK’s machines. As such, we have a deep understanding of the industry and the huge impact that ATM crime has on local communities. In 2018, the industry suffered a total of 878 ATM attacks, and whilst up to eight out of ten attacks result in no cash loss, the disruption to the community and local business is huge.

The cost of a new ATM depends very much on the make and model of the device and this can be up to tens of thousands of pounds. But in the immediate aftermath of an attack, this is not the primary concern. First and foremost, it is a crime scene, and it takes time to gather the evidence necessary to catch and prosecute those responsible.

Once the police complete their work on the crime scene, it is vital that the site is secured and strengthened before a new machine to be installed. The techniques that criminals use to gain access to an ATM are dangerous and, particularly with ram raids, there are building works that usually need to be completed. We also take the opportunity to re-evaluate the site and install additional security measures designed to minimise the chances of the crime happening again.

Our Secure ATM initiative is the largest investment in ATM Security the UK has ever seen, and we have implemented some of the industry’s leading technology to make our machines the most secure in the country. This whole process can take up to four and a half months to complete.

EG: There is a lot of talk about the UK becoming a cashless society, but what is driving this? Consumers, banks, card schemes or governments?

MT: Technological advances have created the opportunity to deliver new, innovative payment methods. Most of the innovation in payments is driven by large tech companies, with huge R&D budgets. But the changes they introduce are not, on the whole, consumer-driven.

We are concerned that much of the innovation is purely about profit, and as a consequence, many of the pitfalls of a cashless society are being masked.

You only have to look at Sweden, the darling of the cashless lobby, where the Government is now saying that citizens must hold an emergency supply of cash, just in case something unexpected happens. How ridiculous is that?

But this doesn’t mean that I am anti-innovation, especially given my previous role at ACI and as MD of Clear2Pay and VocaLink. I absolutely believe in the benefits of payment innovation, but not at the expense of choice. Let’s deliver a more diverse payment ecosystem and allow consumers to decide which innovations improve their lives, and which can be safely ignored.

EG: Who exactly benefits from a cashless society?

MT: There are two main beneficiaries: the banks who can reduce their costs, because let’s face it, cash can be expensive to manage, and the technology companies who can drive incremental revenues from new payment methods.

The number of cash payments is currently reducing by around 6% per year. As such, the banks are concerned that the fixed costs associated with managing the cash cycle are a burden for them. But, let’s remember, the banks have a duty to manage money in all its forms for the benefit of the economy and consumers, so they cannot simply walk away from cash.

Instead, we need to innovate around the cash cycle to ensure that cash remains sustainable until such a time that consumers no longer need or want to use it.

The Access to Cash report by Natalie Ceeney has pointed the way for the UK. However, we don’t believe that this is something the banks can do in isolation. There needs to be change (pardon the pun) and the discussion around what a sustainable cash ecosystem looks like needs to be defined by all stakeholders. It’s time to look at the whole system and determine how best to achieve a sustainable future.

EG: And from the tech companies point of view?

MT: The technology companies have a totally different perspective. In a cashless society, there is nothing to regulate the price of payment. This mns that, with cash out of the picture, the price of payment is not constrained and you could imagine a scenario where this leads to an increase in charging to retailers. This additional cost will, ultimately, be paid by the consumer either directly or through increased prices. In addition, technology companies gain a huge amount of behavioural data about individuals. This data is valuable and whilst it can certainly be used to enrich our lives, it does open up concerns about our rights to anonymity. 

That’s not to say that there is no benefit for consumers of the payments innovations that are being introduced. Many non-cash payment technologies provide for better user experience. E-commerce is a great example of how payments innovation has enriched consumer experience.

There is no doubt that a less-cash world will have benefits for all, but let’s not sleepwalk into the Utopian vision that the cashless lobby would have us believe.

Anything that reduces choice does not get my vote.

EG: What is the UK Government doing to maintain consumers’ access to cash?

MT: The Government has welcomed the findings of the Natalie Ceeney report, but I don’t believe they are doing enough in practical terms to deliver a sustainable cash infrastructure.

Today, UK consumers benefit from one of the world’s largest and most efficient free-to-use ATM networks, but the recent LINK interchange cuts are having a dramatic, negative impact and it’s being felt most severely in the areas where ATMs are needed most.

The industry needs to take a breath and determine how best to maintain this vital resource. In order to facilitate this, the Government should, in my opinion, be instructing LINK to retract the second 5% cut before irreparable damage is done to the UK’s ATM infrastructure. This would allow us the space to work collaboratively with the banks and the regulator to find a sustainable funding model.

EG: Thank you. I look forward to continuing this conversation in the second part of this interview.